Still No Agreement Between United and ACA

[Cosmo]

So what''s the problem? ACA operates 88 CRJs and about 30 J41s for United at ORD and IAD, providing a substantial portion of the major''s feed at ORD and nearly all of it at IAD. ACA''s pilots have agreed to a somewhat lower salary structure, contingent upon a renewed agreement with United. And many of ACA''s flights operate in the crowded northeastern part of the U.S., an area where operating costs are often higher than elsewhere in the country.

Given these facts, I would assume that the two parties can''t be that far apart regarding the new contract''s terms. I''m also assuming that United realizes that costs really are higher in the northeast and that it can''t replace all of ACA''s 118 aircraft very quickly (the Mesa deal was for many fewer aircraft and could also be aimed at Air Wisconsin, United''s highest-cost regional feeder). But I could also be wrong regarding one or more of the above assumptions, so any insight that others could provide would be appreciated.

Here''s the ACA press release issued this morning, noting that discussions on June 30 produced no agreement acceptable to ACA.

 

[Cosmo]

And the just-announced United-Air Wisconsin agreement (see United's press release) won't help! With United now having agreements with SkyWest, Mesa and Air Wisconsin, ACA could be facing much stronger leverage by United. Indeed, ACA could easily find itself without a United Express contract in the near future if an agreement with the major is not reached soon.

On the other hand, Air Wisconsin is known to have substantially higher costs than ACA. So if an agreement can be reached between United and Air Wisconsin, it seems to me that it shouldn't be too hard for United and ACA to find a mutually-agreeable solution as well. Time will tell how this plays out.

 

[Fly]

Reuters
UPDATE - Atlantic Coast says still no deal with United Air
Wednesday July 2, 3:33 pm ET
By Meredith Grossman Dubner


CHICAGO, July 2 (Reuters) - Atlantic Coast Airlines (NasdaqNM:ACAI - News) said on Wednesday it was having difficulty renegotiating an agreement to cover regional routes for United Airlines, which accounts for about 85 percent of its business.
Air Wisconsin Airlines Corp. all fly as United Express under these agreements.
Atlantic Coast has been in talks for months with United, a unit of UAL Corp. (OTC BB:UALAQ.OB - News), on setting 2003 rates as well as a separate longer-term service agreement. The regional carrier said a June 30 meeting between the two parties was unsuccessful and it was developing contingency plans in the event that no deal would be reached.
Shares of Atlantic Coast fell sharply on Tuesday after rival regional carrier Mesa Air Group Inc. (NasdaqNM:MESA - News) said it had reached a 10-year deal to provide expanded feeder service to United.
United said on Wednesday it reached an 11-year deal with privately held Air Wisconsin to add 20 more jets under the United Express brand. A United spokesman would not comment on how many jets Air Wisconsin currently operates for United.
SkyWest sealed an expanded 11-year deal with United in June.
"Entering negotiations with the hopes of a rate increase as Atlantic Coast did appeared reckless from the start," said J.P. Morgan airline analyst Jamie Baker. "While we ultimately believe Atlantic Coast and United will craft a deal, we believe it will be at terms far more favorable to United than to Atlantic Coast."
United has been under heavy pressure to contain costs as it reorganizes its business after filing for bankruptcy last December.
UPPER HAND
United could also have the upper hand in negotiations because alternative regional partners are plentiful, while Atlantic Coast's options for other carrier partners are more limited, Baker said.
He noted that United's deal with Mesa was a "distinct negative" for Atlantic Coast, which he rates "underweight."
Merrill Lynch analyst Michael Linenberg on Tuesday lowered his rating on Atlantic Coast to "neutral" from "buy," partly due to competition from Mesa for United Express service. He added, however, that he was confident Atlantic Coast and United would reach an agreement sometime this summer.
Atlantic Coast has about 80 jets in operation with United, with another seven planned for this year and six more planned for next year, Baker said. It also plans to add 28 jets in 2005.
Under the memorandum of understand between Mesa and United announced Tuesday, Mesa will add 35 regional jets to its service with an option for 25 more, in addition to 10 turboprops that Mesa will begin flying for United on Monday, a United spokesman said.
Aside from United Express, the rest of Atlantic Coast's revenue comes from Delta Air Lines (NYSE:DAL - News), for which it provides Delta Connection regional service.
Shares of Atlantic Coast were off $1.45, or 13 percent, to $9.71 in heavy trading Wednesday afternoon on the Nasdaq after sliding more than 20 percent to a two-month low earlier in the session. Shares of rival Mesa Air were up 83 cents, or 9.9 percent, to $9.25.

 

[funguy2]

Something interesting is brewing here... But given many years of a successful partnership, the question is why?

UA can clearly replace ACA... They''ve give 35 RJs to Mesa, 20 RJs to AWAC, and probably more to Skywest. Skywest shows a number of delivery positions with no associated mainline partner on its website in the route map area. It appears as though UA is either growing its RJ fleet substantially or replacing ACA.

Was there a falling out? Was it the lawsuit ACA started, trying to force a contract on UA, or something older? UA practically "raised" ACA. There would probably be no ACA without UA''s help. So why this seemingly sudden rift? Or am I reading into this too much?

 

[flythewing]

So why this seemingly sudden rift? Or am I reading into this too much?

***
Checked out their ''service'' at ORD?

 

[dispatch_guy]

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They''ve give 35 RJs to Mesa, 20 RJs to AWAC, and probably more to Skywest. Skywest shows a number of delivery positions with no associated mainline partner on its website in the route map area.



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Skywest was given 30 70 seaters, and an agreement to bring the 50 seaters to 55 aircraft. Also UA gave SKYW 87 options on the 70 seaters.